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Ohio company wants deeper electric rate cut
Published: September 20, 2012
HANNIBAL, Ohio (AP) — A large Ohio aluminum manufacturer that has benefited from deep electric-rate subsidies says it needs an even better deal to avoid mass layoffs.
Ormet Corp., located near Hannibal in eastern Ohio, has benefited from a unique electric-rate subsidy that has reduced its costs by more than $150 million since 2009. It's paid for by all American Electric Power customers.
Ormet's CEO said the company is still suffering because of low aluminum prices and because of a series of rate increases by the electric company. And he said that unless it can get a better arrangement with the utility, nearly all of his 1,000 or so workers could lose their jobs.
"We're saying we need some modified assistance versus what we have in our current contract," CEO Mike Tanchuk told The Columbus Dispatch for a story published Friday. "I think it can be done and be done in a reasonable way."
Partly because of high power costs, Tanchuk has idled production at two of the plant's six lines. He's now talking to officials at AEP and in Gov. John Kasich's administration about possible options.
Ormet is the largest employer in a region of the state where jobs are hard to find, and it's the largest of the utility's 1.5 million customers in Ohio.
AEP declined to discuss the situation with Ormet beyond a statement: "AEP and the state of Ohio have been incredibly supportive of Ormet with their very attractive electric rate arrangement, and we continue to support them today."
Three years ago, then-Gov. Ted Strickland and the Public Utilities Commission of Ohio hailed the electricity-rate deal between Ormet and AEP as one of the key elements that would help the aluminum producer stabilize its finances after exiting bankruptcy. Last year, the aid was equivalent to nearly a 50-percent discount on electricity.
But Tanchuk said the discount has been canceled out by AEP's rate increases. Since 2009, the utility has raised its rates for all customers almost every year. The most-recent increase to Ormet, which went into effect this month, will add about $20 million per year to the plant's operating costs.
Ormet commissioned a study last year from an economist who estimated the company contributes $238 million per year in wages, benefits, taxes and other spending to the region. Of the total, $63 million was employee wages.
Some observers say Ormet's discount may be too high and that the company should be allowed to succeed or fail on its own.